Many of our clients are interested in reverse mortgages. Like any other major financial decision, it is important to do research and understand the risks involved with a reverse mortgage. A person who is 62 years or older is allowed to take out this type of home equity loan and continue to live in their home. Many borrowers miss the fine print and do not fully understand what they are getting into. Here are some common myths and mistakes associated with reverse mortgages:

1. You can own in your home and live there without paying anything forever.

A reverse mortgage generally requires the homeowner/borrower to carry homeowners insurance and pay their annual property taxes. Many people who have had their homes paid off for some time forget to carry the required homeowners insurance and provide proof of that insurance to their reverse mortgage company. If you do not pay the annual property taxes and carry insurance, the reverse mortgage company can and likely will foreclose on your home for those missed payments.

2. A reverse mortgage does not need to be repaid and is a free government benefit paid to the elderly.

This is not true. A reverse mortgage is a home loan based on the equity in your property; it is not a government benefit. If you do not repay this loan, then when you pass away your family does not inherit your home, the reverse mortgage company has the right to the property.

3. A reverse mortgage is an interest free loan.

A reverse mortgage is just like any other home equity loan. A reverse mortgage has fees and interest associated with the loan.

4. A reverse mortgage cannot be foreclosed on because the home has homestead protection.

A reverse mortgage is just like any other mortgage, the company who holds the mortgage can foreclose when the agreement is breached by the borrower. Homestead does not protect your home from mechanic’s liens, and voluntary liens like those from your mortgage company and homeowner’s association.

If you are facing foreclosure from your reverse mortgage company it is important to contact an attorney to discuss your options. Call Treasure Coast Legal for your free consultation today.